Fertilizers in Africa

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Fertilizers in Africa
Fertilizers in Africa
Bergen June 14, 2005

• Bergen June 14, 2005

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Content of presentation

• Yara history of the company and current
  situation
• Yaras history in Africa
• Present situation Yara, hunger hot spots and MD
  Goals
• The Tanzania storage project

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Content of presentation

1. Yara history of the company and current
   situation
2. Yaras history in Africa
3. Present situation Yara, hunger hot spots and MD
   Goals
4. The Tanzania storage project

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(No Transcript)
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Sam Eyde (1866-1940)

• Founded Norsk Hydro on December 2nd, 1905
• Believed in Norwegian hydroelectric power as the
  basis for the development of large-scale
  industry
• Main goal production of nitrate fertilizer
• Challenge to be first in the industry

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Yaras history and growth
1996 Acquisition of Nutrite in Canada and
Italian fertilizer operations 1999-2001 Agri
Turnaround Acquisition of Kynoch in S. Africa and
Trevo in Brazil March 2004 Hydro Agri listed on
the Oslo Stock Exchange as Yara International ASA
1973 Joint venture in Qatar
QAFCO 1979-86 Acquisitions in Netherlands,
Sweden, Denmark, UK, Germany and France. Terminal
in China. Office in Harare opened, starting
business development in Africa.
1991 Acquisition of ammonia plants in Trinidad
and a nitrate plant in Rostock, Germany

• 1905
• World's first production of nitrogen fertilizer
  at Notodden, Norway
• 1928
• Porsgrunn Plant, Norway
• 1946
• Market operations in North America
• 1972
• Market operations in Thailand

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Becoming a separate company was a major milestone
March 25th, 2004 - Hydro Agri is de-merged from
Hydro and listed in the stock exchange as a
separate company
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Yara key facts 2004

• Revenues NOK 43.3 billion
• EBITDA NOK 5.8 billion
• Operating income NOK 3.6 billion
• Net income NOK 3.8 billion
• Fertilizer volume 21.9 million tonnes
• Employees 7,200

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Yara after 100 years still out in front
2004 revenues

• Revenues include fertilizer-related products
  used for industrial purposes, converted to USD
  at 2004 average currency rates. Yara and Mosaic
  are pro forma numbers
• Mosaic Cargill Fertilizer IMC, year end
  May 31, 2004

Source Company Reports
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Unique global distribution network
Major plant
Sales office
On the ground in 50 countries, sales to more
than 120 countries, more than 160
plants/terminals/warehouses
No. of plants/ terminals/ warehouses
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Nutrient sources of productivity boost in
agriculture
Nutrient source

• Tonnes of wheat per hectare

Mineral fertilizer
Manure
Soil fertility
2.4 average annual fertilizer volume growth
1970-2000
Source IFA,Worldmarkets.com
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Healthy food for plants
... yields healthy food for people
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Our Mission

• We strive for better yield

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Yaras Centennial GiftThe Yara Green Revolution
of Africa program
Yaras Centennial gift after 100 years of
supplying mineral fertilizer is to support the
effort of creating a Green Revolution in Africa,
the only continent that has not yet had the
fruits of modern farming practices
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Three projects in support of the Green
Revolution of Africa program
A foundation that every year awards a prize to
people who have made an extraordinary effort in
support of a Green Revolution in Africa
Yara Green Revolution of Africa Award
Linked to the UN Millennium Village project
implementing Task Force action plans. Includes
school lunches to stimulate learning and the
creation of local markets for subsistence
farmers. Co-sponsored by Yara employees
The Yara School Project
A business concept for a secure supply of mineral
fertilizer at predictable prices to small hold
farmers in East Africa.
The Yara Small Hold Farmer Project
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Content of presentation

1. Yara history of the company and current
   situation
2. Yaras history in Africa
3. Present situation Yara, hunger hot spots and MD
   Goals
4. The Tanzania storage project

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Aims for our role in Africa

• To be one of the major suppliers of fertilizer
• Technology transfer through joint ventures,
  management agreements, training etc.
• Participate and/or contribute to local promotion
  of fertilizer and de-bottlenecking of internal
  distribution network

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Yaras history in Africa

• Yara established trade in the 1980ties selling on
  tenders to state purchasing and importing
  organizations
• Liberalization structural adjustment programme
  in the 1990ties opened the way for private
  enterprises
• Yara responded to the challenge

Yaras terminals and production system 1995
Invoiced Sales Africa (KMT)
2500
2000
Kynoch
1500
1000
Offices
500
Terminals
0
Productions
1981
1982
1983
1984
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
2000
2001
2002
2003
2004
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The small scale farmers

• Availability of quality seed and other inputs
• Expensive inputs-no economics of scale
• Unavailability of farm finance loans
• Irregular visits by collectors/exporters
• Unremunerative prices
• Unreliable information on trends in the market or
  when to plant next
• Poor transport
• Harvest and post harvest losses

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Farm outputs the importance of Cash crops

• The trigger for increased food production
• The trigger for increased availability of
  agricultural inputs
• Cash crops
• Cotton
• Sugar
• Coffee
• Tea
• Maize
• Tobacco
• Flowers

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Cash crop market problems the Cotton example

• Unfair competition is hurting African cotton
  exporters
• Increased subsidies in the west is disturbing
  market balance
• 16 million farmers in 9 West African countries
  depend on cotton export

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Heavy dependence on coffee for cashcash

• Coffee exports as a precentage of total exports
  (2000)

Burundi 79
Ethiopia 54
Uganda 43
Rwanda 31
Honduras 24
Source Oxfam Briefing Paper 2002
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EU and the world white sugar prices

• 1990-2002 (current prices)

Source Oxfam Briefing Paper 2002
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The market for farm inputsConclusion and
challenge

• The farmer can only function as the pull factor
  in an improved input delivery system if
• Cash crop prices improve
• Access to regional and international markets
  improve
• Access to mineral fertilizers and other farm
  inputs improve

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The input suppliers priorities is often an
obstacle

• Reduce risk to a minimum
• Restrictive in taking a forward stocking
  position
• Will only ship large quantities against bank
  certified documents
• Will sell only on cash basis in the market place

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Content of presentation

1. Yara history of the company and current
   situation
2. Yaras history in Africa
3. Present situation Yara, hunger hot spots and MD
   Goals
4. The Tanzania storage project

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Present situation
Offices/terminals
Productions

• Setbacks in the 90ties due to
• Vanishing profitabtility of cash crops cotton,
  sugar, coffee, tea, tobacco, ...
• Lack of building food security stocks triggering
  foreign food aid
• Lack of foreign exchange for imports. Closure of
  Yaras Tanzania office
• Setback in privatization, Ethiopia
• Acquisition of Kynoch Fertilizers in 1999/2000
• Political unrest Ivory Coast

Yara sites 2005
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UN Millennium Development Goals
Hunger hot spots
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• The poverty trap is mainly a rural phenomenon of
  peasant farmers caught in a spiral of rising
  populations and stagnant or falling food
  production per person
• Jeffrey Sachs
• The end of poverty
• Penguin Books, 2005

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Content of presentation

1. Yara history of the company and current
   situation
2. Yaras history in Africa
3. Present situation Yara, hunger hot spots and MD
   Goals
4. The Tanzania storage project

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The Tanzania project

• Tanzania suffers from reduced food production due
  to lack of fertilizer available at farm level at
  reasonable prices
• Few importers create a monopolistic situation
  with manipulation of prices
• Tanzanias Government has approached Yara for
  assistance

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Problems related to imports of fertilizers

• Financing lack of funds
• Lack of knowledge on international markets price
  fluctuations
• Timing of order in respect of local market demand
  Local credit facilities
• Compete with one or two big importers
• Customer confidence. How long is he in for?
• Port handling, bagging, warehouse, distribution
  to regional or local storage
• Lack of branded product, representing quality
• Lack of competent staff

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Characteristics of the Tanzania project

• Scope a forward stocking project for the region
• Make sure the basic commodity products are
  available all yearMax 20.000 mt. Stock value 100
  mill NOK
• Available to every small or large distributor at
  fixed public price
• Targeted area Tanzania, Northern Malawi,
  Northern Zambia, Rwanda, Burundi, Uganda
• Solution logistical centre located in Dar es
  Salaam
• Required financial assistance 100 mill NOK over 3
  years

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Where do we go from here?

• Yara proposes to establish a regional storage in
  Dar es Salaam to ensure
• availability of mineral fertilizer during the
  growing season, at predictable
• prices, at farm level
• A succesful implementation in Tanzania may
  trigger initiatives
• for similar projects in Ethiopia and Sudan